Air Liquide, Linde seek helium as US reserves drop

The site in Amarillo is a hangover from the Cold War era and its phased closure increases the risk of supply shortages and higher prices.

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By ALEX WEBB and FRANCOIS de BEAUPUY

Bloomberg

For 50 years a vast aquifer in the heart of the Texas
panhandle has held as much as 30% of the words helium
reserves, acting as a safety valve that buoys supplies when
the global market is interrupted.

The site in Amarillo is a hangover from the Cold War era and
its phased closure increases the risk of supply shortages and
higher prices, spurring a dash by the top two industrial gas
companies, Linde and Air Liquide, to secure other helium
resources in markets from Qatar to Siberia.

The Manhattan-sized rock formation, owned by the Bureau of
Land Management, is being wound down with its reserves
effectively sold out by 2021, according to Nick
Haines, helium chief at Munich-based Linde, the worlds
No. 1 industrial-gas company. As companies wrestle with
already squeezed supplies and an increasingly volatile helium
market, the question for Haines is: In the post-BLM
era, how will the industry manage?

At stake is access to a $2.7 billion market that touches
products from smartphones and scanners to deep-sea diving
tanks and the humble party balloon.

With only about 15 helium sources globally, North Africa and
the Middle East are becoming the industrys new
production powerhouses, leaving companies jockeying for
position to secure supplies. Linde and its rivals have one
eye on a decision on a crucial Qatari helium project tender and are also
looking closely at Irans potential, according to
Zurich-based IHS Global analyst Ralf Gubler.

Moon-Shot Throwback

Prices of helium, a molecule trapped in natural gas fields,
surged last year as rising demand coincided with operational
problems at a plant in Algeria. Air Liquide and others were
forced to stop supplying makers of party balloons to favor
industrial clients.

Security of supply is becoming increasingly important
for these majors, and they recognized that during the last
extended period of shortage, said Lindes Haines.

The Amarillo site, a natural limestone-walled rock formation
covering 13,900 acres and currently holding 10 billion cubic
feet, is a throwback to the space race. When the Cold War
eased, it began to sell them off in 1996. Legislation passed
in October scheduled a shuttering of the BLM facility by
September 2021.

Amarillos importance to stabilizing helium prices
showed last year, when production in Algeria stopped and the
U.S. failed to push through legislation to release more of
the Amarillo reserves quickly enough. The price of helium
from Algeria, where Linde has a plant with Sonatrach SpA,
increased to $10.24 in March from $5.54 a cubic meter in
2009, according to IHS analyst Gubler.

Rising Demand

Demand for helium, more profitable than nitrogen or oxygen
because of its unique properties, is growing at 5% to 6% a
year, said Sam Burton, a manager at the BLMs Amarillo
site.

We are kind of the de facto market setter for the
helium crude price, said Burton. As we become
less and less of a player on the world market, thats
certainly going to be a driver to find other commercially
viable sources globally.

Any surge in prices may threaten that growth if customers
push back and look for alternatives, Lindes Haines
said.

Would you pay a dollar for a helium balloon? Probably.
Would you pay $100 for a balloon? Probably not, Haines
said. So there is an elasticity of demand.

Qatar

Last year, Air Liquide started up the worlds largest
helium purification and liquefaction unit at Ras Laffan
Industrial City in Qatar, which is run by RasGas Co. That
tripled the kingdoms capacity and made it the
worlds second- largest producer of the gas with
one-quarter of global output. Air Liquide, which has offtake
contracts in the first two helium plants in Qatar, is hoping
to be selected for a third one.

RasGas is the master of the game, said Francois
Darchis, a member of Air Liquides executive committee
in charge of research and development in an interview.

While production ramps up in the Middle East and North
Africa, and Gazprom works towards starting a new helium site
in eastern Siberia, Iran could emerge as a fourth major
source within the next 10 years, according to IHSs
Gubler. Representatives for Linde attended a June petrochemical forum in the
country.

Iran and Qatar basically share the same gas field. Most
likely in the Iranian part of the north field, there are
similar amounts of helium available, Gubler said.

Recycling

To keep a lid on costs, manufacturers of magnetic resonance
imaging scanners, which use helium as a coolant, including
General Electric and Siemens are asking manufacturers to
provide more efficient recycling equipment for the gas.

While one of the most abundant molecules in the universe,
helium is difficult to extract from natural gas and difficult
to transport in containers over long distances as it needs to
be liquefied and kept at temperatures close to absolute zero.
The engineering expertise needed to transport the gas creates
extra revenue streams for suppliers, according to
Lindes Haines.

The containers which store the helium at about -269 degrees
celsius cost about $1 million apiece, he added.

The shortage has pushed us and our clients to pay more
attention to the molecule, said Air Liquides
Darchis. Were tracking our containers in real
time because its out of the question to let helium boil
on some dock somewhere.

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